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Thursday, October 14th, 2010

Pittsburgh City Council Votes Down Parking Meter Privatization

Today the Pittsburgh City Council gave a thumbs down to a proposed parking meter privatization/long term lease. It now appears almost certainly doomed when the final vote is taken Tuesday. The City Council was skeptical about may aspects of the contract, and the public was overwhelmingly against it. The vote comes despite a looming December 13 deadline for the city to top up pensions to avoid a state takeover:

“We need to get this dead lease plan off the table now so we can start to figure out what the real solution is going to be,” Councilman Patrick Dowd said….A second, final vote on the bills is scheduled for Tuesday. While a change of mind is possible, council members left little doubt about how they — and their constituents — feel about the mayor’s plan.

“At this point, I think it’s irresponsible to actually entertain a plan that has been universally panned by the citizens of Pittsburgh,” said Councilwoman Natalia Rudiak, the first to call for a vote.

Councilman Bill Peduto said not a single constituent in his district has expressed support for the lease. “I’ve never been in a situation where 100 percent of my constituents were opposed to an issue,” he said.

I’ve been extremely critical of the proposed Indianapolis parking meter lease. While I haven’t looked at the Pittsburgh proposal in detail and so cannot pass judgment on it, this city council vote should certainly be something Indianapolis city-council councilors should take note of – especially as public opinion in Indianapolis is similar to that in Pittsburgh.

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2 Comments
Topics: Public Policy, Strategic Planning, Transportation
Cities: Pittsburgh

2 Responses to “Pittsburgh City Council Votes Down Parking Meter Privatization”

samizdat says:

October 14, 2010 at 10:28 am

Pittsburgh: more sensible than Indianapolis. This privatization crap won’t end though. The City of St. Louis is poised to lose one-third of it’s revenue if Prop A passes and the tax is voted down in 2011. The usual suspects are being proposed for privatization if such a situation comes to pass: Forestry, Water Dept., Trash. Probably more. The wealthy elite and their flim-flam, from the Wall St. Ponzi schemers to the “privatization” proponents, are doing everything they can to cause public municipal and private citizen penury, so as to extract the last drop of our blood, sweat and tears. We built this f***ing country and they’re trying to steal it from us. The notion that the private sector can do things more efficiently is absurd and false. The only thing the private sector wants is to make money, not provide the most services efficiently, nor to build value into the public sphere. I don’t know of a single department in St. Louis with which I’ve had dealings that doesn’t provide the services promised. If the City is inefficient in any way, the lack of updates to it’s computer system over the last 20 years is a larger part of the problem than any alleged disaffected or incompetent employees. If our corporate citizens are so concerned with the efficiency of our Cities, then why don’t they donate or subsidize the installation of new computers? No, of course not. No money in that. The shareholders might whine and sniffle that “they aren’t getting the most value” out of their investment. The CEO? Well, he can’t pat himself on the back with a 100 millionUSD “bonus”. What a country. Congratulations, Pittsburgh, for having some balls. Don’t worry though, they’ll be back when the City can’t balance its’ budget in two years and can’t cut any more from the bone. What next? National Parks and Monuments sold off at fire-sale prices? Don’t rule it out if Repuklicratic Party keeps carrying water for the super-rich and s***ing corporate d***. And we’ll gleefully go along for the ride because of “jobs” and “energy independence”, or some such BS. Damn, my hands hurt.
Phineas Baxandall says:

October 15, 2010 at 11:16 am

Much of what was wrong with the Pittsburgh contract was the same problems in Chicago. The critical difference is that the democratic process worked better in Pittsburgh.

Here are answers to the dozen most asked questions on the privatization proposal (from the Pennsylvania Public Interest Research Group):

1. Why is Pittsburgh considering leasing its public parking system in the first place?

The proposal has been prompted by the severe underfunding of the city’s pension reserves. Based on the funds currently in the pension reserve, it would be able to pay out only 27 percent of its expected future obligations. According to HB 1828, a bill signed into law on September 18, 2009, public pension systems are required to be funded above 50 percent of their expected future obligations. The state must take over control of the pension fund if this is not accomplished by the end of the year, which would require just over $200 million from the city of Pittsburgh. Mayor Ravenstahl has said that he wants to avoid a state takeover and does not want to raise taxes or cut services to generate these funds. Leasing the city’s parking system for a period of 50 years in order to create an infusion of upfront cash of about $452 million is his proposed alternative.

2. What is the current status of the proposal?

The Mayor has asked for the City Council to grant him authorization to sign the proposed contract by October 29. The Mayor identified the preferred bid from LAZ Parking and JP Morgan, which is set to officially expire on November 1, though the companies can extend it. On September 28th, the City Council introduced an ordinance to authorize the deal. The Mayor has stated his intention to put about $220 million from the proceeds of the deal into the pension fund before the end of the year. This week, the Council voted 6-1 against the proposal, but it could come back if the city confronts a state takeover of its pension system at the end of the year.

3. Would the city maintain full control the public parking system if the deal is approved?

No. The city would cede much of its control over Pittsburgh’s parking system to the private corporations involved in the lease agreement. The contract goes so far as to include provisions that give the private operators control over future government actions and decisions by requiring compensation from the city to the for-profit corporation for certain actions, or inaction.

The lease is a joint venture by JP Morgan and Connecticut-owned LAZ Parking. They would receive all revenues from the meters and parking garages, and would be in charge of operating, managing, maintaining, and repairing the system. LAZ Parking is the chief operator in Chicago’s privatized parking meter system, which has generated controversy due to poor implementation and subsequent findings that the city’s share of the deal is approximately a billion dollars less than it should have been. The Chicago deal was also criticized because aldermen (the equivalent of Pittsburgh’s City Councilors) did not have time to examine the proposal or to consider alternatives.

4. How long would the parking system lease last?

Fifty years. As the end of the deal approaches, the private operators will have less and less incentive to properly maintain and invest in the facilities. On top of this, it is nearly impossible to anticipate the future needs of Pittsburgh or the risks that lie ahead for the city in leasing this asset for such a long period of time.

5. Would the city retain control over other parking and transportation policies?

Not if the company believes those measures would hurt its bottom line. Non-Compete clauses in the proposed contract would limit competing parking facilities in areas surrounding the leased assets. In response to virtually any action taken by the city that would reduce the parking system’s revenues or divert customers, the city would be forced pay compensation to the private operator. These might include repair of nearby roads that diverts traffic, improving nearby parking facilities, reducing scheduled parking rate increases, increasing parking tax rates, or insufficient ticketing enforcement of metered parking spaces.

6. What would happen to parking rates for residents and visitors?

Parking rates could increase between three and four times their current level in some places by 2015. The city would also be obligated to defend the private operator in case of outside lawsuits that might challenge those steep rate increases.

7. Could the proposed parking lease agreement be improved?

Greatly. City Councilors could demand removal of any provisions that restrict competition, require future payment from the city in case of future actions that indirectly hinder revenues to the parking system, implicitly or explicitly influence or give the private operator power over government action, and limit transparency. The lease could also be made shorter term, up to a maximum of 30 years, to better manage unanticipated risks in future decades. These changes, however, would likely result in a lower price tag on the lease.

8. What other alternatives are there?

The City Controller has proposed selling or leasing the parking system to the public Parking Authority to ensure that the state does not take over the city’s pension fund. This proposal has a number of advantages. The Parking Authority can obtain the upfront cash more cheaply than LAZ and JP Morgan because the Authority can issue tax-free bonds. As a result, the Parking Authority could impose more modest parking rate increases of 3 to 4 percent annually for 5 years with additional increases following the rate of inflation after that. This would be significantly below the schedule of rate increases proposed in the contract with LAZ Parking. The Controller says that coupling this with a bond would ensure the city retains full control of the asset and pay off the bond after a period of 30 years. A new City Council ordinance would pursue this route.

Alternately, the state could be allowed to assume control of the city’s pension fund. According to the Secretary of the Pennsylvania Municipal Retirement System, James B. Allen, the city would probably need to increase the annual amount it dedicates to the pension fund after 2015. He says that the city would not lose control over the benefits and that state administrative costs would be lower.

9. Would privatizing the parking system solve the pension underfunding shortfall?

No. Pittsburgh’s city controller, Michael Lamb has said that within 10 years, without additional action the pension fund would be back to where it is now, except that the city would no longer collect the valuable ongoing revenue from its public parking assets. The City Controller’s proposal, as he readily admits, is not a comprehensive long-term solution either.

10. Won’t the private company operate the parking system cheaper and more efficiently than the public sector could?

Not likely. It’s possible that a private company could more readily cut wages or health care benefits for its employees, though reduced income among employees would also hurt the city. The main cost for the private operator will being paying the interest for the money that was borrowed for the upfront payment – and this cost is consistently higher for the private sector. LAZ Parking reports “efficiencies” from installing a new payment system in its Chicago operations, but these purported gains are also direct losses for residents of the city. The main efficiency is reducing meter revenue “leakage,” which is when a driver comes to a meter and finds that some time is already on the meter from previous driver. The new system eliminated the possibility for this windfall among users of the meters.

11. Doesn’t the deal shift financial risk in the future off of the city and onto the private operator?

Proponents tout parking privatization as a means for reducing the city’s financial risk in the future. If people stop using parking lots or meters in Pittsburgh, the private investors would lose out. But the measures in the proposed contract seek to protect against policies that might lead to this outcome – and shift those risks instead onto taxpayers who would be forced to compensate the company. They are designed to shift risk from the concessionaire back onto the city.

12. Is the Pittsburgh privatization proposal being handled better than in Chicago?

There are some improvements from the Chicago deal. The simple fact that we have the opportunity to view various versions of the proposed agreement, that the City Council commissioned an outside study on the value of the deal, and that both the mayor and council have accepted and requested public comment are improvements in themselves. That said, the Pittsburgh proposal still contains many of the same problems as the Chicago deal.

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